Faloon v Commissioner of Inland Revenue

[2015] NZHC 1529

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2015-485-289 [2015] NZHC 1529

UNDER

the Taxation Review Authorities Act 1994

IN THE MATTER

of an appeal under section 26A of the Taxation Review Authorities Act 1994 from the Interim Decision dated

24 March 2015 of Her Honour
Judge A A Sinclair as Taxation Review
Authority

BETWEEN

CLARENCE JOHN FALOON Appellant

AND

THE COMMISSIONER OF INLAND REVENUE

Respondent

Hearing:	25 June 2015
Counsel:	Appellant in Person P H Higbee for Respondent
Judgment:	2 July 2015

JUDGMENT OF BROWN J

[1]      The issue raised by this appeal is whether the High Court has jurisdiction to hear an appeal from an interlocutory decision of the Taxation Review Authority.

The Taxation Review Authority proceeding

[2]      The    appellant    filed    a   “challenge”    proceeding    in   the   Authority    on

17 October 2014 under Part 8A of the Tax Administration Act 1994 (TAA).  Because

the Commissioner considered that the appellant’s challenge related to claims that had already been adjudicated upon and conclusively rejected,1 the Commissioner applied

1      Faloon v Commissioner of Inland Revenue (2011) 25 NZTC 20,097 (HC) at [35].

to strike out the appellant’s challenge proceeding as an abuse of process of the

Authority.

[3]      The appellant filed a notice of opposition to the Commissioner’s application. He also filed a notice of application to set aside the affidavit filed in support of the Commissioner’s strike out application.   When the Commissioner filed a notice of opposition to that application, the appellant filed an application to set aside the Commissioner’s notice of opposition.  These several applications were set down to be heard in the Authority on 10 February 2015.

[4]      Because he had filed a strike out application, the Commissioner did not file a notice of defence which, in the ordinary course, would have been required to be filed on or before 24 November 2014.2

[5]      Because no statement of defence had been filed the appellant adopted the stance that there was no jurisdiction for the Authority to hear the Commissioner’s strike out application of the appellant’s challenge proceeding.  Consequently, on the morning of the hearing of 10 February 2015 the appellant filed a protest objecting to the jurisdiction of the Authority to hear and determine the proceeding.

[6]      Having considered written submissions from both the Commissioner and the appellant, Judge A A Sinclair issued an “interim” decision on 24 March 2015 holding that the Authority did have jurisdiction to hear the strike out application notwithstanding that  a  notice of defence had  not  been  filed.   Consequently the appellant’s notice of appearance under protest to jurisdiction was dismissed.

[7]      From that decision the appellant filed the appeal presently before this Court. The Commissioner responds that this Court has no jurisdiction to entertain an appeal

from an interlocutory decision of the Authority.

2      Taxation Review Authorities Regulations 1998, reg 11.

The Commissioner’s argument

[8]      The Commissioner first  drew  attention  to  s 26A of  the Taxation  Review Authorities Act 1994 (TRA Act) which provides for appeals to the High Court in respect to challenge proceedings:

26A     Challenges appealed to High Court

(1)       Unless subsection (2) applies, the determination by an Authority of a challenge may be appealed to the High Court if—

(a)      The amount of tax involved in the appeal is $2000 or more;

or

(b)      The amount of net loss involved in the appeal is $4000 or more.

(2)       The  determination  by  an  Authority  of  a  challenge  may  not  be appealed to the High Court if the determination was made by the Authority under a tax law that provides for the Authority's determination to be final.

(3)       This section applies only to challenges commenced under Part 8A of the Tax Administration Act 1994.

[9]      The  Commissioner  contended  that  the  words  “the  determination  by  an Authority of a challenge” in s 26A(1) mean a final determination of a challenge and hence there is no right of appeal from a decision by the Authority that does not constitute a final determination of a challenge.   Reliance for this proposition was placed on the decision of the Court of Appeal in M & J Wetherill Co Ltd v Taxation

Review Authority3 and the subsequent application of the Wetherill reasoning in Jiao v

Commissioner of Inland Revenue.4

[10]     Among other things Wetherill concerned an appeal from a decision of the Authority to grant an extension of time in an objection proceeding.  Speaking with reference to the then applicable section conferring the right of appeal (s 26 of the

TRA Act) the Court of Appeal said:

3      M & J Wetherill Co Ltd v Taxation Review Authority (2004) 21 NZTC 18,924 (CA).

4      Jiao v Commissioner of Inland Revenue (2009) 24 NZTC 23,763 (HC).

[60]      In our view the Commissioner is correct in the submission made that there is no right of appeal on interlocutory matters under s 26(1).

[61]      The place to begin is with the text itself.   The opening words of s 26(1) refer to “The determination of the authority on any objection

…”.   (Emphasis added.)   Taken at their face, they appear to us to refer to the determination of the objection itself.

[11]     The reason of the Court of Appeal was applied in Jiao where Venning J

dismissed an appeal from the Authority’s refusal to grant an application for recall:

[9]       In Wetherill the Court of Appeal held that no right of appeal existed under  s 26  of  the  Taxation  Review Authority  from  interlocutory decisions of the Taxation Review Authority.  The Court concluded that the reference in s 26 of the Act to determination suggested the decision appealed from must be final.   The Court concluded that there was no right of appeal on interlocutory matters provided by s 26(1).

[10]      While the section considered by the Court of Appeal in Wetherill was a different section to that before the Court in the present case, there is no material difference in the relevant part of the wording. Section 26(1) referred to “The determination of an Authority on any objection”.    Section 26A(1)  refers  to  “the  determination  by  an Authority of a challenge”.  In both cases the right of appeal is from the determination of the Authority on the substantive matter in issue, in s 26 the objection, and in s 26A, the challenge.

[12]     On  the  basis  of  those  authorities  the  Commissioner  submits  that  the Authority’s decision that it has jurisdiction to hear the Commissioner’s strike out application is not the final determination of the appellant’s challenge and hence the Court does not have jurisdiction to hear an appeal from the Authority’s decision under s 26A.

The appellant’s submission

[13]     The appellant referred to r 11.2 of the High Court Rules and to r 11.2 of the District Court Rules 2014, noting that both referred to four types of judgment which may be entered by a Court:

11.2   Types of judgment

A judgment may—

(a)       be interim; or

(b)      be final; or

(c)       deal with any question or issue; or

(d)      order any accounts, inquiries, acts, or steps that the court considers necessary.

[14]     He  submitted  that  any  of  those  four  types  of  judgment,  if  issued  in  a challenge under Part 8A of the TAA before an Authority, may be appealed to the High  Court  as  a judgment  susceptible to  appeal  as  of right  under s 26A.    The “interim” decision dated 24 March 2015 was said to be one such judgment.   A number of further points were made to which I refer in my reasons below.

[15]     He then submitted that there was an error in para [10] of the Authority’s

decision, namely the statement:

There is no regulation contained in the Taxation Review Authorities Regulations 1998, (the Taxation Review Authorities Act 1994, or the Tax Administration Act 1994), setting out a procedure for an application to strike out  a  notice  of  claim.    This  is  provided  for  under  the  District  Courts Rules 2014.

[16]     The appellant’s response to that conclusion was that s 138H of the TAA is a “special rule” for the purposes of s 31 of the Crown Proceedings Act 1950 which states that general rules apply in the absence of special rules.   Consequently he contended that it was inconsistent with the special rule in the form of s 138H for the respondent to invoke the general rule in the District Courts Act 2014 in support of the application to strike out his challenge proceeding.

Decision

[17]     The Authority’s observation in para [10] needs to be read in the context of the sequence of reasoning as follows:

[8]       Both the High Court Rules and District Courts Rules provide time limits for filing a statement of defence and use the word “must”.  However the Courts have held that it is not necessary to comply with those time limits before filing a strike out application.

[9]       The District Courts Rules 2014 apply to the extent that they are not inconsistent with the Taxation Review Authorities Regulations 1998. Regulation 4 specifically provides:

4.        Application of District Court Rules [2014]

To the extent that they are not inconsistent with these regulations, or the provisions of the Taxation Review Authorities Act 1994, or the Tax Administration Act 1994, the District Courts Rules [2014] apply to the commencement, interlocutory steps, and conduct of proceedings  in  the Authority  as  if  those  proceedings  were  civil proceedings in the District Court.

[10]     There is no regulation contained in the Taxation Review Authorities Regulations 1998, (the Taxation Review Authorities Act 1994, or the Tax Administration Act 1994), setting out a procedure for an application to strike out  a  notice  of  claim.    This  is  provided  for  under  the  District  Courts Rules 2014.  I do not consider that there is any inconsistency in applying the same approach to the timing of such applications as applies under both the High Court and District Courts Rules.  Accordingly, I am satisfied that this Authority has jurisdiction to hear and determine the strike out application without a notice of defence having previously been filed.

[18]     I consider that that conclusion is clearly sound.

[19]     However the immediate question is the status of the Authority’s decision of

24 March 2015. The alleged error of law does not provide support for the appellant’s proposition.   Nor does the argument that the decision was “interim” and not “interlocutory”.  Nor do I consider that there is any merit to the suggestion that, if the judgment of 24 March 2015 was an interlocutory order, it would not have been sealed when issued but would only have been sealed after application made by a party for an order in form 20.

[20]     The  nature  of  a  final  judgment,  and  the  contrast  with  an  interlocutory decision, is conveniently described by the Court of Appeal in Waterhouse v Contractors Bonding Ltd:5

[16]      Third, as a matter of principle, a High Court decision, including one made on an interlocutory application, that constitutes a final disposition of the rights of the parties would not ordinarily be considered to be an interlocutory decision.  A decision determining the rights of the parties and bringing a proceeding or claim to an end, in whole or in part, is a final decision in that respect as far as the parties are concerned, whether or not there has been a full hearing on the merits.  It is a final judgment of the High Court against which, in the absence of any other restriction, the unsuccessful party would expect to have a general right of appeal to this Court.  On the other hand, a High Court interlocutory decision is ordinarily understood to be a decision made in the course of a proceeding leading to or facilitating the hearing of the claim and its ultimate disposition following the hearing.  An

5      Waterhouse v Contractors Bonding Ltd [2013] NZCA 151, [2013] 3 NZLR 361.

interlocutory decision would not normally be understood as one that finally determines the rights of the parties and brings the proceeding to an end.

[21]     In the instant case, the Authority’s decision to dismiss the appellant’s protest to jurisdiction was plainly not the ultimate disposition of the appellant’s claim in the Authority.  On the contrary, the dismissal of the protest clears the way for a hearing that may lead to the determination of the appellant’s challenge.

[22]     The appellant simply did not engage with the authorities of Wetherill and Jiao which I consider are clearly in point.   Consequently I accept the Commissioner’s argument on the basis of those authorities that no appeal to this Court lies from the Authority’s decision of 24 March 2015 which was plainly an interlocutory decision and not a final determination of the appellant’s challenge proceeding.

[23]     The appeal is dismissed.  The respondent is entitled to costs on a 2B basis together with disbursements as fixed by the Registrar.

Brown J

Solicitors:

Crown Law, Wellington